Home Builders Compensation Fund

 

“Home Warranty Insurance” – is a term that many homeowners are unaware of, prior to starting their renovation or new build journey. So what is it? 

Home Building Compensation Fund is managed by insurance company, iCare. In summary, it is insurance for HomeOwners, engaging with a Builder or Licensed Contractor for work valued at over $20,000. It covers any losses to the HomeOwner arising from defective and incomplete work. It is important to understand that this insurance only covers where the Builder or Contractor either:

  • becomes insolvent
  • dies
  • disappears, or
  • has their building licence suspended due to non-compliance with a money order in your favour made by the NCAT or a Court.
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It is unfortunate, but it does happen, and therefore this insurance is compulsory.

The cover can be for up to 6 years, depending on the severity of the issue. Subsequent purchases of the property are also covered under this insurance. 

All licensed contractors that take on any form of residential work of over $20,000 must take out the HBCF insurance cover, and as the homeowner, it is your responsibility to ensure that you have received your certificate before you start building, or take on any money under the contract, including a deposit. This certificate is actually required as part of a Construction Certificate (should the work require council approval), and therefore this means you generally do need to decide on your contractor before commencing any work. 

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But the process of obtaining (and maintaining) HBCF for contractors is not easy! 

 

We must first obtain a Certificate of Eligibility, which states out the types of construction and how much work we can take on. This is a tedious process, and includes both a company and the director’s personal financial assessment. There are also frequent reviews on this eligibility, which provides iCare with additional information on the contractor’s ability to undertake work of particular value. 

Once that has been obtained, a builder or licenced tradesperson can apply for the Certificate of Insurance, on behalf of the homeowner for their particular project. The application is a simple form fill out, with details regarding the project. The cost of the insurance is per project, and based on the contract price, the location, and the applicable loading. Every contractor must also apply via a broker, who will charge a brokerage fee. 

We would advise that you find out whether your selected contractor has included the cost of the insurance within their quote. It is not compulsory to include it within a quote, but it is compulsory to have this insurance for any project over $20,000 when working directly with a HomeOwner. 

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Once the broker has sent their invoice and this invoice has been paid, the broker will issue a Certificate of Insurance. This will include the policy number and this is the document required to be sent to the Council or Certifier as a part of their Construction Certificate checklist. Even if you are not going through the council approval process, it is important that you keep a copy of the certificate. 

Feel free to reach out to us if you have any questions about Home Warranty Insurance. 

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